Contract Strategy and Supplier Selection

Our aim for this project was not just to help BP select the right partner but also to inspire the candidates during the process.

Challenge

Our client, The Saltend Chemicals Park, BP, was looking to renew two major, long-term contracts for industrial and facilities maintenance.  Both contracts were of significant value and had strategic importance for the site with contract performance having a high potential to influence safety, business performance, site culture and fixed costs. They wanted to take this opportunity to ask really big strategic questions about their requirements from these suppliers and how they worked with them. They also needed to make sure that they covered the detail effectively to ensure they chose the right candidate.

What we did

BP have a well established procurement process so our first exercise was to understand the unique requirements of the Saltend site and how we could supplement their process with our procurement model of excellence.  Our model helped clarify exactly what BP needed from their new suppliers, the type relationship they wanted to have with them and alternative contract models through which to engage them.  It also extended their normal process to not just help BP select the right suppliers, but also to enhance BP’s reputation by the way they ran the tender exercise.

Most procurement processes are designed to help the buyer.  Our process has also been designed to help the candidates.  It was in everybody’s interest for them understand BP’s requirements and then have the best opportunity to explain how they could meet them.  The tender process was also geared to inspire candidates to want to work with the BP team by running a process that would be professional, engaging and thought provoking.

We believe we set a new standard with this project.

How we did it

BP have a well established procurement process so our first exercise was to understand the specific requirements unique to the Saltend site and how we could supplement the BP process to accommodate these.  We also extended the process since our aim for this project was not just to help BP select the right partner but also to inspire the candidates during the process and secure the long term performance of the contracts.  To do this we used our major contract procurement process shown above. 

Clarify needs

We started the project by undertaking a full review of the organisation and performance of their own organisation, current contract strategy and contracts. We also helped them refine their vision for the next 5 years and assessed what functions the BP team was able to deliver without contract support and which functions they should take a lead role for in the future.  This allowed us to define the ideal role of the contract partners in the future and the type of skills and experience BP should explore the market for.

Review contract options

There are a number of alternative contracting styles for major contracts and each have their merits depending on the working practices and priorities of the buyer.  We helped BP draw together learning from other major contracts and then also brought in our experience from additional model types in use across a range of similar sites across the UK and globally.

Develop selection strategy

The selection strategy concentrated on the following areas:

  • Provide a structured assessment process to allow BP to rank the candidates against safety, capability, range of services and costs.
  • Enabling the candidates to understand BP’s needs so that they had the best opportunity to describe their fullest ability to support BP.
  • To make sure the candidates understood the BP vision for maintenance services and were inspired by the idea of working with BP to deliver this.

The first area is commonly considered in major tenders and were covered through a combination of carefully developed quantitative and qualitative questions and a scoring process to support this.  The third consideration is all too often neglected.  We have reviewed a number of major tender exercises and have concluded that buyers tend to focus so hard on their own needs that they neglect the needs of the applicants.  At best this is a fundamental weakness since the tender exercise will have a fundamental influence on the relationship the buyer will have with the successful candidate.  At worst it can create unnecessary work for the candidates, confuse them, make the buyer appear arrogant and leave candidates wondering whether they want to work with the buyer.

BP understood this and wanted to use the tender exercise to show candidates that they had the chance to be part of something that was special and that the BP team would be a very good team to work with.

Run Process

A well thought through process should be educational and inspiring for all parties.  It should also run smoothly with a clear plan up front so that everyone knows what to expect and wherever possible should be run to schedule.  The last point was an opportunity for BP to further differentiate themselves from other sites since it is not the norm for tender exercises of this type to be run in line with the declared milestones. 

Select Partner

The selection strategy and supporting scoring system allowed BP to reduce the applicants to a final shortlist very effectively, but the top contenders needed additional assessment to give a final conclusive decision.  This is not unusual since the best candidates will challenge best-in-class standards, offer something new or offer something unexpected.   This was addressed by a final round of close discussions and further scoring against each candidate’s ability to help BP deliver their short, medium and long-term ambitions. 

Implement

Changing suppliers smoothly with no adverse impact on safety or maintenance performance is no small achievement.  However, it is only the first step.  BP were making this change to deliver a major change in maintenance performance.  Our approach to this was to review transition processes from the new suppliers, BP and our own process and agree how these could be combined into a common approach, which was successfully implemented and supplemented in a similar way by a continuous improvement program.

Outcome

BP came to a clear, unanimous conclusion on the strongest candidates and successfully achieved a seamless transfer to the new suppliers.  All of the targets and milestones were met in full throughout the tender process, some early wins have already been delivered and BP and their new suppliers have now moved into a continuous improvement process to deliver further improvements.